Excess Savings: Indication For Exceptional Inflation Expansion!

Hi,

Welcome to this analysis about the current and upcoming economical situation regarding the excess savings amassed in the corona crisis and the potential inflationary developments these can cause. There are also other factors that can accelerate inflation in the upcoming times especially with the ongoing central bank money press that shoot to astronomically high levels during the corona pandemic and the months after, still ongoing there is not an end in sight. Since the corona breakdown lows established the money stock increased more and more and caused an asset-price inflation in stocks, bonds and real estate as well. Taking the following factors into consideration the inflation can also increase seriously in consumer goods and real economy such as already seen in individual sectors such as the craft sector.

Accumulated Excess Savings During The Corona Pandemic Crisis:
As seen in the graphic the Excess Savings, the savings that households hold and do not spend immediately increased drastically during the corona pandemic as businesses shut down people hoarded the excess savings. According to Moody's Analytics, the Excess Savings in America grew to almost 2.6 Trillion US-Dollar, and around the world, people build up Excess Savings of 5.4 Trillion US-Dollar. These savings are waiting to be spent when the real economy shut-down-businesses widely open again. It is necessary to assume that these are historical high values never seen before which can cause similar inflation like in the 1940s or 1970s. Besides the high Excess Savings, the federal depth increased also substantially to similar levels like in the 1940s which served as one factor for the high inflation.

High Demand And Low Supply As Production Decreased:
As production during the corona pandemic crisis decreased and a vast majority of countries moved on to shut down businesses this caused a decrease in production and therefore in supply. On the other side the Excess Savings, as well as the printed central bank money, increased steeply. These developed conditions have a high tendency to lead to increased inflation as high demand meets the low supply moving the prices to the upside also shown through the output gap which experts expect to rose above the 2% level increasing the high-demand-to-low-supply dynamic. It is highly necessary to do not underestimate these dynamics and be prepared for such potential scenarios to do not get overwhelmed by circumstances when they happen.

In this manner thank you, everybody, for watching the analysis, will be great when you support it, and all the best!

Information provided is only educational and should not be used to take action in the market.

Comment:

UPDATE: Excess savings since the corona pandemic disrupted the global financial markets, economy, and supply-chains in an enormously severe manner the excess savings could stabilize to moderate levels.

If a new black swan event such as the corona crisis should arise again this is going to trigger the same excess savings record highs and the inevitable consequences for the global financial markets.